Loan repayment benefits garner interest, yet lack full broker comprehension
Supplemental medical products such as hospital indemnity, critical illness and accident continue to dominate the voluntary space. However, more and more employers are beginning to show interest in financial wellness benefits like student loan repayment and assistance, leading brokers to examine if they have the know-how to develop a profitable and functioning plan for their clients.
Peter Marcia, CEO of a management and consulting firm out of Atlanta, YouDecide, foresees the continuing increase in student loan programs being offered by employers as more and more young talent enter the workforce.
“I have gone to three meetings — one in Milwaukee, one in New York and one in Florida — and all three clients have asked us to investigate rolling out student loan programs,” Marcia says. “It is a higher priority than other [voluntary benefits].”
Jeff Oldham, senior vice president of employer sales and Benefitstore at Benefitfocus, has supported the implementation of student loan assistance benefits for a long time, saying these benefits can help get employees out of tight financial binds as well as keep them from accessing savings vehicles such as a 401(k) or other retirement plans early.
“If you are an employee — doesn’t matter your age — and you have a ton of student loan debt, you cannot obtain a proper brick-and-mortar loan to help you, because, likely, you are not qualified,” Oldham says. “What will happen then, the employee will try and go to their 401(k), which is just the worst thing someone can do, and when they drain out their 401(k), they then pivot to these ancillary companies that are out there, such as auto title loans.”
However, while Marcia and Oldham advocate for student loan repayment benefit options, other brokers and vendors say these types of benefits are not ready to be implemented just yet.
Joseph Cacciatore, director of sales at Lake Norman Benefits, says benefit advisers have become spread thin when it comes to being all-knowledgeable about benefits and perhaps financial advisers should take the lead when discussing voluntary benefits that handle financial services.
“Most certainly, there are many ambitious and savvy millennials, not to mention Generation X and Y, that are still saddled with student loan debt, and they are ready to stop dragging that refrigerator in the sand, and who would welcome any credible assistance in doing so,” Cacciatore says. “However, for the mid-size consultant, focusing in employee benefits for firms primarily with about 51 to 2,000 lives, we are not seeing an effort on the part of the lenders or financiers to push those products via the traditional brokerage model.”
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Eric Silverman, principal and owner of Silverman Benefits Group, agrees with Cacciatore, saying brokerages, particularly boutiques, lack the manpower necessary to have knowledge in every area of benefits, even those that are specifically focused in the voluntary benefits space.
“I struggle with hundreds and hundreds of broker partners around the country who still do not get the true value of how to implement and install core voluntary benefits such as accident, hospital indemnity, critical illness and so on,” Silverman says. “To say that all of a sudden we’re going to have … all of these brokers trying to sell other financial wellness and student loan-type services, my gosh, to me that is a tall order.”
The vast majority of boutique brokerages around the country are manned by one or two brokers with 50 to 100 clients within their local community. Silverman says this puts a strain on the amount of time a broker can meet with each client to educate them on new benefits and also requires the broker to take additional time to become knowledgeable about new benefits coming into the market.
“Even if the employer says they like [the benefit], they still need the boots on the ground to properly educate the employee on why these benefits make sense,” Silverman says. “Those advisers then need to have knowledge about the core benefits accident, critical, cancer, etc., or the new-age benefits like student loans or other financial wellness benefits. Either way, you have to have the knowledge to provide the educational components.”
In contrast, Cacciatore says mid-size regional benefits firms that have a division specializing in retirement planning and hold six or seven licenses, as well as CFP designations, should see loan assistance benefits as an opportunity.
“There are already companies pitching financial software solutions in this space that lean on technology, employee self-service and concierge consultation when needed,” Cacciatore says. “There is an investment involved in these solutions, but at such a level that employers find manageable and are willing and able to invest.”